European shares start November on a two-year high

LONDON (Reuters) - European stocks surged to two-year peaks on Wednesday, lifted by resilient company earnings and record highs set in Asia and New York, though a 6 percent slump in Standard Chartered shares kept the banking sector under a cloud.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, November 1, 2017. REUTERS/Staff/Remote

At 1000 GMT, the pan-European STOXX 600 rose 0.6 percent to 397.43 points, a level last seen in August 2015.

Some of that was down to Germany's DAX .GDAXI index which, playing catch-up after Tuesday's holiday, jumped 1.3 percent to hit a fresh record high.

The European benchmark is enjoying its fifth straight day of gains and rose almost 2 percent in October, having also taken a cue from global markets which have been propelled higher by hopes of U.S. tax cuts, economic recovery and a robust tech cycle.

“Economically everything looks good at the moment,” said Jonathan Bell, chief investment officer at Stanhope Capital.

Bell cautioned, however, that while investors were riding the rising wave, markets could be vulnerable to monetary policy changes.

The day’s top performer was British drugmaker Indivior (INDV.L) which soared 11.5 percent after U.S. authorities recommended approval for an opioid addiction drug. The stock has risen about 24 percent already this week.

“On our view (the recommendation) substantially increases the probability of approval ... which is material given its importance to future growth prospects,” analysts at Jefferies told clients, rating the stock a Buy.

Fellow drugmaker, Denmark’s Novo Nordisk, lost 2.8 percent after publishing third-quarter results and warning that new legislation in some U.S. states could hurt business in its key market.

Still on the earnings front, forecast-beating third quarter results drove up shares in Finnish tyre maker Nokian Tyres by some 6 percent, while British bookmaker Paddy Power (PPB.I) jumped 4 percent to three-month highs.

Of the STOXX600 firms which have reported third quarter results, almost half have beaten forecasts, according to Thomson Reuters I/B/E/S, which also predicts average earnings to increase 3.5 percent over the same 2016 quarter.

But the latest earnings season has rekindled some worries for Europe’s banking sector.

While BNP Paribas (BNPP.PA) shares extended the previous day’s 2.7 percent fall due to disappointment in its fixed income trading operations, Standard Chartered (STAN.L) was Wednesday’s biggest loser, with its biggest daily fall in three months.

While the Asia-focused lender posted a 78 percent rise in pre-tax profit, this was overshadowed by higher expenses and flat revenues, dashing investors’ hopes for dividend payments.